Nigerian Digital Lender Payhippo Secures $3m Seed Funding

Nigerian lending startup Payhippo announced that it had secured $3 million in seed funding. The funding round was led by leaders in the tech sector including the Co-Founders of ChipperCash, Ham Serunjogi, and Maijid Moujaled; Gbenga Agboola, founder of Flutterwave; Hakeem Bello-Osagie, founder of Métis Capital Partners; and Bolaji Balogun of investment banking firm Chapel Hill Denham. Investment firms TEN13, VentureSouq, and Prodigio Capital also took part in the round.

According to Payhippo, this funding will go towards bringing aboard more talent needed to optimise the technological capabilities of the company in line with its mission to support small businesses in Africa by providing innovative solutions to unlock sources of capital. 

In Nigeria, small businesses play a crucial role in the economy, accounting for 96 per cent of the companies, 84 per cent of total employment, and 48 per cent of the national GDP. There are approximately 40 million SMEs across the country, with little to no structure that gives them access to formal financing or credit. The current systems have extremely high collateral requirements which these businesses cannot afford or take an excruciatingly long time to process, leaving SME owners frustrated. Another reason for the difficulty in accessing credit is small businesses in Nigeria are predominantly cash-based, making it difficult to create a credit footprint. In the absence of these records and data, most business owners will find it difficult to access formal financial services. 

According to this study conducted in Nigeria, there is a strong relationship between bank loans and the performance of SMEs. The lack of access to credit and capital is a major barrier to the development of SMEs as it prevents them from acquiring the new technology that would make them more productive and more competitive.

This is the problem Payhippo aims to solve. 

The company was founded in 2019 by Zach Bijesse, Chioma Okotcha, and Uche Nnadi who serve as CEO, COO, and CTO respectively. After struggling to fund their business ideas, the team saw the need to create an advanced lending product for small businesses on the continent and birthed Payhippo.

The start-up provides small businesses with access to credit in a matter of hours. With Payhippo, small business owners can apply for loans via the company’s app. The company uses the information provided during the application process to verify the business’s data in minutes and determine the value of the loan to be offered. This information includes historical records the business has built with the company as well as their banking history. The disbursement is done via the app and takes place in less than three hours after application.

According to COO, Chioma Akotcha, this is because the team understands that there needs to be a “shorter turnaround time in accessing funding – especially for businesses selling goods who need to maintain adequate stock levels to meet their customer demand levels.” Using this method, the company has disbursed 5,000 loans to small businesses across Nigeria and according to a financial report, made $64,000 in revenue from $900K disbursed. This translates to a monthly growth rate of about 25 per cent with a 97 per cent repayment rate on loans.

As more businesses make the switch from traditional banks to online institutions like PayHippo, the company needs more people on deck. Chioma revealed that a part of the funding will go towards employing more engineers and data scientists. “We capture our data from the loans we issue, and more talent in the team would allow us to optimize our technology to serve our customers better,” she explains.

“The funding will allow us to invest in hiring more engineers and data scientists. We aim to improve our technology and enhance our lending offerings as we continue to address the persistent financing gap for small businesses in Nigeria. At Payhippo, our vision is to provide millions of small businesses with sufficient and available capital to run and grow their businesses.”

Ham Serunjogi, who was one of the leading investors of this round said, “New financial technologies are being developed and implemented changing the competitive landscape in the financial sector in Africa. Access to credit is a critical necessity for small businesses to manage their daily challenges. Payhippo helps address this need through its innovative approach that provides loans to small businesses in less than three hours enabling them to have access to sufficient working capital to grow.”

This isn’t the first time PayHippo has received funding. In August, it closed a $1 million pre-seed round led by VCs Venture Platform, Future Africa, and Launch Africa. The funding was used to expand to even more cities in Nigeria and build a more formidable engineering team.

The online lender says its target moving forward is to cater to the credit needs of 1 per cent of the market’s 40 million SMEs daily. The demand for credit in Nigeria is growing at an exponential rate, and Payhippo currently experiences a 25 per cent monthly growth rate.  “We know that just 1 per cent of the Nigerian market is about 40,000 businesses, and we want to be in a position where we disburse 40,000 loans in a day.”